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Empirical Risk Analysis of Pension Insurance: The Case of Germany

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  • Wolfgang Gerke
  • Ferdinand Mager
  • Timo Reinschmidt
  • Christian Schmieder

Abstract

The book reserve system is the most widespread method of financing occupational pension plans in Germany. The pension liabilities are mutually insured by the Pensions‐Sicherungs‐Verein VVaG (PSVaG) against bankruptcy. The PSVaG recently stated that the insurance system needed to be reformed. In the future, risk‐adjusted premiums as foreseen for the newly established Pension Protection Fund in the United Kingdom could become feasible. We perform a credit portfolio analysis to determine the risk profile of the PSVaG. The magnitude of a tail risk event suggests that under the current financing system it can only be smoothed out over decades. Under an expected loss pricing plan insurance premiums would vary greatly. In a marginal risk contribution approach the variation of the premiums would be less pronounced.

Suggested Citation

  • Wolfgang Gerke & Ferdinand Mager & Timo Reinschmidt & Christian Schmieder, 2008. "Empirical Risk Analysis of Pension Insurance: The Case of Germany," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(3), pages 763-784, September.
    • Handle: RePEc:bla:jrinsu:v:75:y:2008:i:3:p:763-784
    DOI: 10.1111/j.1539-6975.2008.00283.x
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    Cited by:

    1. Ingrid Stein, 2015. "The Price Impact of Lending Relationships," German Economic Review, Verein für Socialpolitik, vol. 16(3), pages 367-389, August.
    2. Mager, Ferdinand & Schmieder, Christian, 2008. "Stress testing of real credit portfolios," Discussion Paper Series 2: Banking and Financial Studies 2008,17, Deutsche Bundesbank.
    3. John A. Turner & David M. Rajnes & Gerard Hughes & Michelle Maher, 2020. "War and Pensions: The Effects of War on Social Security and Pensions Around the World," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(2), pages 1-45, February.
    4. Heusel, Nicola & Mager, Ferdinand, 2023. "Pension funding and the cross section of stock returns - The case of Germany," Journal of Banking & Finance, Elsevier, vol. 150(C).
    5. M. B. Gordy & E. Lutkebohmert, 2013. "Granularity Adjustment for Regulatory Capital Assessment," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 38-77, September.

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    More about this item

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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